How Home Buyers Can Overcome Tough Competition
To win in a hot market, take advantage of tech to find homes as soon as they are listed.
Nela Richardson is chief economist for Redfin, a national real estate brokerage.
How would you describe the housing market?
Hot and record-breaking. This past spring, strong demand and a shortage of inventory resulted in the lowest supply and the fastest pace of sales that we've seen, and the trend will continue this fall. Basically, starter homes have disappeared. Price growth was astounding everywhere -- not only on the coasts, but in places like Omaha, Grand Rapids, Mich., and Buffalo, N.Y. In most markets, buyers must be intrepid, and they need to understand that sellers are under a lot of pressure, too. Sellers want to feel confident that the deal will close so they can buy their next home.
How can buyers find a home?
Arm yourself with tech tools to find available homes quickly. With the variety of apps available today, you can receive listing alerts so that you're notified as soon as a home in your price range or search area hits the market. The Redfin app, for instance, lets you search by school boundaries, find open houses or schedule a tour for the same day.
How can buyers win the day without offering more money?
Buyers will gain an advantage from whatever concessions they can offer. Instead of a small earnest-money deposit, we've seen buyers put into escrow their entire down payment or even half of the purchase price.
You needn't waive a contingency for inspection in the purchase contract. Rather, you can agree to pay the seller, say, $2,500, or next month's mortgage payment, if you walk away.
Work with a local or reputable lender to get a preapproval for your mortgage that includes full documentation of your means to obtain a certain amount of financing in advance of a signed purchase contract. That may give you the confidence to waive a contingency for financing, and it’s almost as good as cash for closing a deal quickly.
Because sellers can sell their homes in days but may take months to buy, you can gain leverage by offering to "rent back" their home to them for a certain number of months.
Is fall a good time to buy?
Yes. Home prices generally peak in the summer and ease up in the fall. There's a bit less inventory, but many fewer buyers. Plus, sellers who list in the fall are serious because they must leave because of job relocation, divorce or something else that made them miss the top of the season. So the next time I buy, my kids will have to move during the school year.